Life is very unpredictable; you might not realise when you would end up requiring an instant flow of cash in advance. For such an unforeseeable financial future, it is important to implement decisions to safeguard both, present and future. If you are a car owner, consider that taken care of. Loan against car is an exceptionally convenient option being extended by numerous banks and lenders which allows you to take an immediate loan to meet up your financial necessities by pledging your four-wheeler as a security.
Usually, the lending institutions and banks extend loans against car at interest rates ranging from 12% to 17% per annum. The processing fee ranges between 1 to 3% of the loaned amount. You can avail loan up to 50 to 150% of the market value of your vehicle with flexible repayment tenures stretching from 12 to 84 months.
Currently, HDFC and Axis Bank are known to provide the best loans against cars:
- In case of HDFC Bank, the loan offered is upto 150% of the vehicle’s value. They don’t seem to pester the borrower about the valuation of the vehicle in order to extend the loan. If you are familiar with net banking, you can get the loan credited in less than 12 hours. The interest rates are 2 units down as compared to the personal loan which is 13.75% per annum. The processing fee of the loan is a nominal amount of 1.5% of the loaned amount. The existing borrowers under loan against car can get an instant top-up loan if they have regularly paid the EMIs of the past 9 months and an instant disbursal whenever needed.
- When it comes to Axis Bank, the amount of loan granted is upto 50% of the vehicle’s market value. The interest rate is somewhat similar to HDFC Bank which is a solid 13.99% per annum for a 5-year tenure. Also, they offer pre-approved loans at attractive interest rates coupled with quick processing and minimal documentation to their privileged customers. The processing fee of the loan is a minimal amount of 2% of the loaned amount.
Both the bank loan schemes include other internal charges such as stamp duty charges. Documentation charges, an overdue EMI fees of 2%, collateral charges, cheque bounce charges, etc. The part payment charge is 5% of the part payment amount and the pre-closure charge is 0-6% depending upon your loan plan.
It is essential to go through the eligibility criteria which fences the approval of the loans against cars in India. Before you read further about it, check if you are upto mark considering all of the following conditions. If yes, you are strapped up and good to go! The eligibility criteria for the loan differs with different banks but the generic one is as follows: –
- Age: The applicant must be a minimum of 21 years old or a maximum of 65 years old while applying for the loan.
- Both, salaried and self-employed persons are eligible to avail the loan, but they must have a decent and regular source of income. For a salaried individual, the monthly salary must be at least Rs.20,000 and a minimum work experience of a year. For a self-employed individual, they must have an ITR filed for the last 2 years if the loan amount is greater than Rs. 15 Lakhs.
- Typically, loans are extended against cars that are below 10 years of age. Sometimes, banks do not provide loans against those vehicles that are out of production.
Documents Required For Loan against car:
In case of a loan against a car, the lender has a security to rely upon. Thus, there is minimal documentation concerning the loan. Make sure you possess all the right documents as stated by the loan scheme. The documentation differs with different banks, but the most general requirements are as follows:
- Self-attested application form with an attached passport size photograph of yourself.
- Proof of Identity and Age: Pan Card/ Passport/ Voter ID/ Driving Licence/ Aadhar Card.
- Income Proof: Latest Income Tax Return Certificate, Salary Slips, Form 16, Audited Financial Sheet, Qualification Certificate, Certificate of Practice, Shop Act Licence, Sales Tax Certificate, etc.
- Residential Proof: Aadhar Card/ Ration Card/ Voter ID/ Driving Licence/ Passport/ Electricity or Water Bills.
- Legal documentation of your vehicle: Registration Certificate and valid motor insurance policy documents.
Procedure to Avail the loan:
A car owner can rescue himself from painstakingly high interest rates on personal loans. By pledging his vehicle as a collateral and retaining its ownership throughout the repayment tenure. Though the borrower must do sufficient research in order to acquaint themself with the various loan schemes offered by numerous banks and non-banking financial lenders and compare the plans in terms of interest rates levied, processing fee, EMI scheme, overdue EMI interest, loan repayment tenure, amount of loan that will be sanctioned, processing time, disbursal process and pre-closure fee. Once, you have zeroed down upon the suitable loan plan by a lending institution of your choice, the generic procedure is as follows:
- The borrower must visit the website of the bank or the financial lender to apply for the loan online. One can also physically visit the nearest branch of the bank.
- You might have to pay a nominal application fee which includes the cost of the legal verification process, valuation, and evaluation of your vehicle documentation.
- The consumer support team of the bank or the lender will contact the applicant and request for the submission of relevant documents.
- The bank will then contact you in regard to the approval of the loan or you can check the status of your loan application on the website of the lender using your application reference number.
- If the application is approved, then the loan amount will be credited in the bank account of the borrower.
Availing for a loan on the basis of your personal assets is a very common and convenient practice in a developing country such as India. As common the practice is, as scarce is the knowledge concerning the correct procedure. It is important to know how to cross a road of debt to a brighter financial future.